| --- | --- | --- | |-------|-----------------------------------|-------| | | | | | | 2Q 2024 Earnings Conference Call | | | | August 1, 2024 | | Safe Harbor Regarding Forward-Looking Statements 2 Forward-Looking Statements This presentation contains certain estimates and forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbor provisions for ...

Financial Data and Key Metrics Changes - In Q2 2024, Corteva reported top and bottom line growth with nearly 250 basis points of operating EBITDA margin expansion, driven by strong demand for proprietary technology [5][15] - Organic sales increased by 2% year-over-year, with pricing up by 2% and flat volumes overall [15][17] - For the first half of 2024, operating EBITDA was approximately $2.95 billion, slightly down from the previous year, with a margin expansion of nearly 60 basis points [16][18] Business Line Data and Key Metrics Changes - Seed business net sales were up 2% in the first half, with organic sales up 4% due to broad-based pricing gains [16][17] - Crop Protection net sales and organic sales were down 11% in the first half, with pricing down 4% due to competitive pressures [17][18] - Crop Protection volumes improved by 6% in Q2, indicating a potential stabilization in the market [8][17] Market Data and Key Metrics Changes - The U.S. crop mix has shifted from corn to soybeans, with corn and soybean crop conditions running above 2023 levels, suggesting strong yield expectations [11][13] - Global stocks of major grains and oilseeds are stabilizing, leading to pressure on commodity prices [13] - Farmers are tightening their operating approaches due to lower commodity prices and higher interest rates, but confidence remains high among the majority [13] Company Strategy and Development Direction - Corteva aims to become royalty neutral by the end of the decade, with a focus on technology sales and strong demand for new corn trait technologies [7][10] - The company is optimistic about 2025, contingent on stabilization in the Crop Protection market and a return to growth [10][34] - The strategy includes continued investment in R&D and maintaining a strong value proposition for farmers [48][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the second half of 2024, anticipating volume growth in Crop Protection driven by Brazil and new product demand [24][25] - The company is monitoring competitive pricing dynamics closely, particularly in the Crop Protection sector [35][56] - Management highlighted the importance of brand trust and the historical performance of Corteva's products in maintaining customer loyalty [13][64] Other Important Information - Corteva announced a new CFO, David Johnson, effective September 16, 2024, succeeding Dave Anderson, who will remain as a strategic advisor until early 2025 [29][30] - The company is on track to complete $1 billion in share repurchases for the year and has increased its annual dividend by 6.25% [21][22] Q&A Session Summary Question: Comments on 2025 outlook and concerns - Management remains confident about 2025, emphasizing controllable factors like Seed out-licensing and productivity improvements, while monitoring Crop Protection pricing closely [33][34] Question: Comparison with competitor's revenue growth - Corteva's pricing was down approximately 5% in Q2, but volumes were up 6%, indicating a focus on sustainable recovery [37][38] Question: Factors affecting guidance adjustment - The guidance was adjusted primarily due to weather impacts, missed applications, and Crop Protection pricing dynamics, with Brazil's volume recovery being a key focus [50][52] Question: Concerns about pricing pressure and competition - Management is not overly concerned about pricing pressure, citing healthy on-farm demand and a more stable channel environment [56][57] Question: Volume expectations for the second half - Volume expectations for Crop Protection in the second half are balanced, with mid-teens growth anticipated, particularly driven by Latin America [60][61]

Core Insights - Corteva, Inc. reported revenue of $6.11 billion for the quarter ended June 2024, reflecting a 1.1% increase year-over-year and exceeding the Zacks Consensus Estimate of $6.1 billion by 0.14% [1] - The company's EPS was $1.83, up from $1.60 in the same quarter last year, surpassing the consensus estimate of $1.74 by 5.17% [1] Revenue Breakdown - Seed revenue was $4.33 billion, slightly below the average estimate of $4.36 billion, with a year-over-year increase of 1.6% [3] - Crop Protection revenue totaled $1.78 billion, marginally missing the estimate of $1.79 billion, showing no change from the previous year [4] - Other Crop Protection revenue was $170 million, below the estimate of $174.47 million, representing a significant decline of 19.8% year-over-year [5] - Seed-Other revenue reached $145 million, compared to the estimate of $171.61 million, marking a 2.1% increase year-over-year [6] - Herbicides revenue was $946 million, falling short of the $994.99 million estimate, with a year-over-year decrease of 4.1% [7] - Insecticides revenue was $415 million, slightly below the estimate of $424.78 million, but showing a strong year-over-year increase of 25.4% [8] - Fungicides revenue was $250 million, below the estimate of $301.89 million, with a minor decline of 0.8% year-over-year [9] - Seed-Soybean revenue was $1.32 billion, matching the estimate and reflecting a 4.9% increase year-over-year [11] - Seed-Corn revenue was $2.68 billion, exceeding the estimate of $2.59 billion, with a 0.4% increase year-over-year [12] - Seed-Other oilseeds revenue was $186 million, below the estimate of $225.09 million, representing a 4.1% decline year-over-year [13] Operating Metrics - Operating EBITDA for Seed was $1.70 billion, surpassing the average estimate of $1.54 billion [14] - Operating EBITDA for Corporate was -$36 million, worse than the average estimate of -$28.88 million [15] Stock Performance - Corteva, Inc. shares have returned +5.2% over the past month, outperforming the Zacks S&P 500 composite, which declined by -0.4% [15]

Core Insights - Corteva, Inc. reported quarterly earnings of $1.83 per share, exceeding the Zacks Consensus Estimate of $1.74 per share, and up from $1.60 per share a year ago, representing an earnings surprise of 5.17% [1] - The company posted revenues of $6.11 billion for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 0.14% and showing a slight increase from $6.05 billion year-over-year [2] - Corteva's shares have increased approximately 15.9% since the beginning of the year, outperforming the S&P 500's gain of 14% [3] Earnings Outlook - The future performance of Corteva's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is -$0.14 on revenues of $2.77 billion, while for the current fiscal year, the estimate is $2.78 on revenues of $17.29 billion [7] Estimate Revisions - The trend for estimate revisions ahead of the earnings release was unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which investors can track [5] Industry Context - The Agriculture - Operations industry, to which Corteva belongs, is currently ranked in the top 41% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, Cibus, is expected to report a quarterly loss of $0.81 per share, reflecting a year-over-year change of +73.4%, with revenues projected at $0.44 million, up 120% from the previous year [9]

Financial Performance - Net sales for Q2 2024 reached $6,112 million, a slight increase from $6,045 million in Q2 2023, representing a growth of 1.1%[1] - Net income attributable to Corteva for Q2 2024 was $1,053 million, compared to $714 million in Q2 2023, marking a significant increase of 47.4%[1] - Basic earnings per share from continuing operations for Q2 2024 was $1.51, up from $1.23 in Q2 2023, an increase of 22.8%[1] - Net income for the six months ended June 30, 2024, was $1,479 million, compared to $1,316 million in the same period of 2023, representing a 12.4% increase[5] - Operating EBITDA for the second quarter of 2024 was $1,917 million, an increase from $1,746 million in 2023, reflecting a growth of 9.8%[11] - Operating earnings (Non-GAAP) for the second quarter of 2024 were $1,905 million, compared to $1,972 million in 2023[30] - Operating Earnings (Non-GAAP) for Q2 2024 reached $1,280 million, compared to $1,139 million in Q2 2023, an increase of 12.4%[33] - Operating Earnings Per Share (Non-GAAP) for Q2 2024 was $1.83, up from $1.60 in Q2 2023, reflecting a growth of 14.4%[33] Sales and Revenue Breakdown - Total net sales for the second quarter of 2024 were $6,112 million, with organic sales increasing to $6,172 million, reflecting a growth of 1% from the previous year[10] - Seed segment net sales for the first half of 2024 reached $7,082 million, up from $6,959 million in 2023, indicating a 1.8% increase[6] - Crop protection segment net sales for the first half of 2024 were $3,522 million, down from $3,970 million in 2023, showing a decrease of 11.3%[7] - North America net sales increased by $81 million, a 2% change compared to Q2 2023, with organic growth of $83 million, also a 2% increase[13] - EMEA region experienced a decline in net sales of $41 million, a 6% decrease, with organic growth of $7 million, a 1% increase[13] - Latin America saw a net sales increase of $42 million, a 7% growth, with organic change also at $41 million, a 7% increase[13] - Asia Pacific reported a net sales decline of $15 million, a 4% decrease, with an organic change of $(4) million, a decrease of 1%[13] - Total net sales for Corteva, Inc. increased by $67 million, a 1% change, with organic growth of $127 million, a 2% increase[13] Expenses and Costs - The cost of goods sold decreased to $2,918 million in Q2 2024 from $3,137 million in Q2 2023, a reduction of 7.0%[1] - Research and development expenses increased to $357 million in Q2 2024, up from $329 million in Q2 2023, reflecting an increase of 8.5%[1] - The company reported capital expenditures of $(262) million for the first half of 2024, slightly higher than $(250) million in the same period of 2023[5] - The company recognized significant restructuring and asset-related charges of $(92) million in the second quarter of 2024, compared to $(60) million in the same quarter of 2023[23] Assets and Liabilities - Total assets as of June 30, 2024, were $41,464 million, down from $42,996 million at the end of 2023, a decrease of 3.6%[2] - Cash and cash equivalents decreased to $1,839 million as of June 30, 2024, from $2,644 million at the end of 2023, a decline of 30.4%[2] - Total current liabilities decreased to $8,953 million as of June 30, 2024, from $10,409 million at the end of 2023, a reduction of 13.9%[3] - Total stockholders' equity increased to $25,421 million as of June 30, 2024, compared to $25,279 million at the end of 2023, an increase of 0.6%[4] Cash Flow and Financing - Cash provided by operating activities for continuing operations was $(1,999) million for the first half of 2024, compared to $(2,480) million in 2023, an improvement of 19.4%[5] - The net change in borrowings for the first half of 2024 was $628 million, compared to $885 million in the same period of 2023[5] - Cash, cash equivalents, and restricted cash equivalents at the end of the period were $2,141 million, down from $2,963 million at the end of the previous year[5] - Free Cash Flow for the first half of 2024 is projected to be between $1,500 million and $2,000 million, with capital expenditures estimated at $630 million[40] Tax and Exchange Losses - The base income tax rate from continuing operations (Non-GAAP) for Q2 2024 was 22.5%, compared to 21.3% in Q2 2023[33] - The company reported a net after-tax exchange loss of $48 million for Q2 2024, compared to a loss of $91 million in Q2 2023[37] - Income from continuing operations before income taxes (GAAP) for Q2 2024 was $1,338 million, up from $1,084 million in Q2 2023, indicating a growth of 23.5%[35] - The effective income tax rate (GAAP) for Q2 2024 was 21.1%, compared to 18.8% in Q2 2023[35] - The company experienced a pre-tax exchange loss of $78 million in Q2 2024, down from a loss of $104 million in Q2 2023[37]

Core Insights - Corteva, Inc. reported solid financial results for the first half of 2024, driven by the strength of its Seed business and effective operational execution [1][3][5] - The Crop Protection industry faced challenges due to residual destocking and competitive pressures, impacting overall performance [1][4][5] - The company has lowered its 2024 revenue and operating EBITDA guidance to align with current market dynamics [1][5][27] Financial Performance - For Q2 2024, Corteva's net sales reached $6.11 billion, a 1% increase compared to Q2 2023, while income from continuing operations was $1.06 billion, reflecting a 20% increase [2][11] - In the first half of 2024, net sales totaled $10.60 billion, down 3% year-over-year, with organic sales decreasing by 2% [3][5] - The Seed business segment achieved a 2% growth in net sales for the first half, driven by a 5% price increase, despite a 1% decline in volume [5][19] Crop Protection Overview - Crop Protection net sales decreased by 11% in the first half of 2024, primarily due to a 7% decline in volume and a 4% decrease in price [5][26] - The Crop Protection segment's operating EBITDA fell by 39% year-over-year, attributed to pricing pressures and raw material cost inflation [26][27] Guidance and Strategic Actions - Corteva updated its full-year 2024 guidance, expecting net sales between $17.2 billion and $17.5 billion, with operating EBITDA projected between $3.4 billion and $3.6 billion [6][27] - The company plans to repurchase approximately $1.0 billion in shares during 2024, indicating a strong balance sheet and cash flow [1][6][27] Market Dynamics - The Crop Protection market is showing signs of stabilization, but competitive pricing pressures remain significant [4][5] - The Seed business continues to outperform the market, likely gaining market share due to strong demand for top-tier technology offerings [5][20]

Executive Leadership Change - Corteva appoints David Johnson as the new Executive Vice President and Chief Financial Officer (CFO), effective September 16, 2024 [1] - David Johnson joins from Atkore, where he served as CFO, bringing over three decades of experience in strategic and financial planning, risk assessment, mergers and acquisitions, and international operations [2] - Current CFO Dave Anderson will transition to a Strategic Advisor role until his retirement in Q1 2025, ensuring a smooth leadership transition [1] David Johnson's Background and Expertise - David Johnson has a proven track record of delivering strong financial results, operational efficiency, and financial discipline in large, global organizations [2] - During his six years at Atkore, he led the company through acquisitions and organic growth investments, transforming it into a leading electrical products company [2] - Prior to Atkore, he spent 29 years at Eaton Corporation, most recently as Vice President, Finance and Operations for its Electrical Sector business [2] Corteva's Financial Performance and Strategic Positioning - Corteva's financial strength has improved significantly, with margin expansion and nearly $4 billion returned to shareholders over the past three years [4] - The company is well-positioned as an industry leader, leveraging its world-class innovation to deliver value and growth to customers and shareholders [4] - Corteva's product and technology pipeline is industry-leading, driving growth and maximizing productivity for farmers globally [5] Industry and Company Overview - Corteva is a global pure-play agriculture company, offering a comprehensive portfolio of seeds, crop protection, and digital solutions to enhance yield and profitability [5] - The company operates with some of the most recognized brands in agriculture and is committed to enriching the lives of producers and consumers while ensuring progress for future generations [5] - Corteva became an independent public company on June 1, 2019, after being the Agriculture Division of DowDuPont [5]

Company Overview - Corteva, Inc. is a global pure-play agriculture company focused on delivering solutions for pressing agricultural challenges through innovation, customer engagement, and operational execution [5] - The company has a diverse mix of seed, crop protection, and digital products and services, supported by a unique distribution strategy [5] Dividend Announcement - Corteva's Board of Directors has authorized a common stock dividend of $0.17 per share, marking an annual increase of over 6% compared to the previous quarterly dividend [3] - This dividend is scheduled to be paid on September 17, 2024, to shareholders of record on September 3, 2024 [3] - This marks Corteva's fourth dividend increase since its 2019 spin-off, reflecting the company's commitment to returning capital to shareholders [3] Preferred Stock Dividend - EIDP, Inc. declared regular preferred stock dividends of $1.12-1/2 per share on the $4.50 series preferred stock and $0.87-1/2 per share on the $3.50 series preferred stock [4] - These dividends are payable on October 25, 2024, to EID stockholders of record on October 4, 2024 [4]

Earnings Expectations for Corteva, Inc. - Corteva, Inc. is expected to report quarterly earnings of $1.74 per share, reflecting a year-over-year increase of +8.8% [2] - Revenues for Corteva are anticipated to be $6.13 billion, which is a 1.4% increase from the same quarter last year [3] - The consensus EPS estimate for Corteva has remained unchanged over the last 30 days, indicating a stable outlook from covering analysts [10] Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that Corteva's Most Accurate Estimate is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.11%, suggesting a bearish outlook [19] - Despite a history of beating consensus EPS estimates in the last four quarters, the current combination of a negative Earnings ESP and a Zacks Rank of 4 makes it difficult to predict a beat for the upcoming report [21][22] Industry Context - Archer Daniels Midland (ADM), another player in the agriculture sector, is expected to report earnings of $1.29 per share, which represents a year-over-year decline of -31.8% [25] - ADM's revenues are projected to be $23.24 billion, down 7.8% from the previous year [25] - The consensus EPS estimate for ADM has been revised up by 3.4% over the last 30 days, but it currently has an Earnings ESP of -6.44%, indicating a lower Most Accurate Estimate [26]

Market Overview - The crop protection chemical market in Ivory Coast has seen significant growth, driven by an expanding agricultural sector with an annual growth rate exceeding 7% over the past twenty years [2][3] - The agricultural industry contributes approximately 22% to the country's GDP and employs around half of the workforce [2] Government Initiatives - The Ivorian government has developed a comprehensive action plan for 2024-2025 focusing on forest protection, agroforestry, sustainable production, and community engagement [3] - The National Agricultural Investment Program (PNIA II) aims to modernize the agricultural sector with a budget of USD 19.8 million allocated for the period from 2017 to 2025 [7] Market Dynamics - The market is projected to grow at a CAGR of 7.1% from 2024 to 2030, driven by the increasing demand for crop protection chemicals due to cash crop cultivation [7][8] - Herbicides currently dominate the revenue share in the market, primarily due to their cost-effectiveness in controlling weeds [4] Market Segmentation - The market is segmented by application, with commercial crops accounting for a significant portion of the demand [10] - Synthetic chemicals hold the highest revenue share in the crop protection chemicals industry, reflecting their widespread adoption in modern agriculture [16] Crop Production and Diversification - Farmers are diversifying crops such as coffee, rubber, cotton, palm oil, and bananas, which enhances productivity and provides alternative income sources [8] - Ivory Coast has become the third-largest producer of natural rubber, further supporting the growth of the crop protection chemical market [8]